U.S. PCE inflation accelerates to 3.8%; markets see Fed holding rates steady through 2027

U.S. inflation picked up sharply in April, fueled by higher energy costs linked to the war in Iran, bolstering the view that the Federal Reserve may keep interest rates unchanged for an extended period. The Bureau of Economic Analysis said Thursday that the personal consumption expenditures (PCE) price index rose 3.8% year over year in April, the biggest increase since May 2023. March PCE inflation was revised to 3.5%. Core PCE inflation, which strips out food and energy, rose 3.3% from a year earlier, up from 3.2% in March. The Fed uses PCE as its preferred gauge for the 2% inflation target. Financial markets are pricing in the Fed's benchmark rate staying in the 3.50% to 3.75% range through 2027. (Jin10)